CIE Automotive India Ltd. share price target

The management indicated that the company will continue to outperform overall industry growth by over 5% in India and European business to gradually grow in line with industry growth. It maintained long-term EBITDA margin guidance at ~17-18%.

Our BUY recommendation is based on growth potential in Indian operations led by increased capacities, further headroom for operational efficiencies and a healthy balance sheet. We expect weakness in European business in H2CY23 but a gradual recovery post that in CY24.

CIE Automotive India’s (CAIL) Q3CY23 consolidated PAT of INR 1.9bn was down 13% QoQ, and lower than our estimate of INR 2.2bn. This was driven by ~80bps QoQ decrease in EBITDAM, at 15.2%, higher interest expense and 200bps higher tax rate. EU revenue declined 15% QoQ to INR 7.3bn due to a slowdown in Metalcastello, and is expected to improve.

A temporary blip

Based on this analysis, our SOTP-based Target Price (TP) for CIE Automotive is Rs 585/share, implying an attractive upside potential of 17% from the current market price (CMP).

We initiated our coverage of the company on April 12, 2023. MCIE's decision to hive off German Trucking is seen as a positive step, as this division has been weighing on the company's EBITDA margins (3-5% vs. a 13-15% portfolio in CY22). We have BUY on stock.